When we get to this time of year, there are sellers who start talking about taking their house off the market for the holidays.
Some sellers think that all the buyers go into hibernation during November and December. Others just don’t want to be hassled with showing their house during the holidays.
There are a number of reasons why people believe putting house selling on hold is the smart thing to do when the snow starts to fly. Well, you might be surprised to find out that taking your home off the market could be a mistake.
Here are the four most common reasons people suspend selling during the end of the year, and why you might want to reconsider such a strategy.
There aren’t any buyers out there: During this time of year, it’s true that many of us get focused on family and turn our thoughts to a great turkey dinner or eggnog in front of the fire. Slogging around in the snow to look at a bunch of houses is clearly a lot less desirable than slipping off your shoes and leaning back in the recliner. And, it’s true that the number of contracts written on houses falls off a bit in November and December. But the idea that real estate agents sit around twiddling their thumbs during the end of the year isn’t entirely accurate. Some people think house selling all but stops. In reality, the number of homes that go under contract in November and December is only about 25 percent lower than the monthly average for the entire year. That would suggest that three quarters of the buyers are still out there looking around.
Another important consideration is the quality of the buyers you get this time of year. If someone’s out in the cold looking for a house in November and December, they’re usually serious about buying a house. Any real estate agent will tell you that, especially in the current real estate market, we get a lot of lookers — people who can’t seem to make up their mind. Most agents have the horror story about going through three oil changes and two sets of brakes with the miles they pile up showing a bunch of houses to an indecisive buyer. Conversely, if someone calls us the day before Thanksgiving to go look at a house, you can bet that buyer is on a mission and they’re serious about writing a contract on something. If you’ve taken your house off the market, you’ll miss out on these opportunities. There may be fewer buyers on the hunt for a house this time of year, but the ones out there are usually excellent prospects.
I’m worried about a lot of days on the market: Many sellers believe that if their house is on the market for too long, buyers will think there’s something wrong with it, and the potential sales could be negatively impacted. Sellers think that the holidays are a good time to take it off the market and avoid racking up a lot of days on the market. In today’s real estate market, that strategy could work against you.
Back when we were in a seller’s market and houses were selling quickly, it was true that if a house was on the market a long time it could become stigmatized, and that might hurt your ability to get top dollar. Today however, the mindset of buyers has changed. Buyers still ask us how long the house has been on the market, but for entirely different reasons. Now, a new listing is frequently viewed as a house where a seller lacks the proper motivation to make a deal. Many buyers are more interested in a house that’s been around for a while, as that may signal a seller who’s getting a bit anxious and will be more willing to negotiate. Consequently, keeping your house on the market during the holidays could actually help you. First, you won’t be inconvenienced with a lot of showings (except for serious buyers), and adding a few days on the market to your listing may actually help inspire buyers to make an offer.
Prices will be higher in the spring: Many sellers get discouraged and think this is a good time to take their house off the market, hoping for better times to come. There are a couple of problems with this. First, prices might not be higher in the spring. According to the trends we’re seeing, what’s more likely to be higher in the spring are interest rates. And, if mortgage rates go up, the number of buyers willing and able to pay for your house may go down. Second, a lot of new listings come on the market in March, April and May. The additional competition and buying options can make for a tougher sale in the spring. Third, and most important, predicting the housing market or the economy in general, is risky business at best.
Plus, unless you’re going to live under a bridge somewhere, most home sellers are also home buyers. In that a rising tide lifts all boats, the conditions that might help you get more for the house you’re selling will also increase the price of the house you’re looking to buy. If the price of a $500,000 house goes up 2 percent in the spring, that’s an extra $10,000 in your pocket. But if you’re moving up to a $750,000 house, that 2 percent bump in the spring will cost you an extra $15,000, making the choice to wait cost you an extra $5,000.
My house will look better in the spring: When the leaves come off the trees and the grass turns brown, it’s easy to conclude that the old homestead will show a bit better when the weather warms and the azaleas are in bloom. But a holiday house also has a certain special appeal. When the plastic Santa and the icicle lights go up, homes exude a unique charm that’s like no other time of the year. As agents, it’s great fun showing homes during the holidays. Digging the key out of a lockbox buried in a snow bank isn’t our favorite thing to do. But once you go inside, there’s nothing like getting that punch of pine from a newly decorated Christmas tree, or seeing a partially finished letter to Santa firmly secured to the fridge with a bunch of magnets.
For buyers, it reminds them of the real reason they’re looking for a house. It isn’t just shelter or some kind of financial investment. For many, it’s the place they call home, the place they raise a family, and especially this time of year, those are powerful motivating forces for most home buyers. So, don’t underestimate the appeal of a house decorated for the holidays. The green grass and blooms of spring are nice too, but those clove seeds stuck in an orange, a table set with the good dishes and all the other festive stuff we pull out of the attic this time of year can also go a long way toward making a buyer say, “This is the place for me.”
In sum, if you leave your house on the market during the holidays, it might not sell. But if you take your house off the market, it definitely won’t sell. There’s little or no downside to keeping the faith. Remember, it only takes one buyer, and you don’t want to yank that “for sale” sign the day before that buyer comes along.

Don’t miss this year’s HOLLY FAIR at OLPH!
Get a jump on your holiday shopping and relax with friends, it’s always a fun event!
Thursday night is Ladies night from 6-9pm!
Over 50 vendors, the famous cookie walk and candy cane cafe, and raffles…. something for everyone!
Local author Jackie Pilossoph will be on hand to autograph her latest book Free Gift With Purchase on Thursday night!

Burdened by Old Mortgages, Banks Are Slow to Lend Now
By NICK TIMIRAOS

A battle over who gets stuck with tens of billions worth of bad housing loans made during the boom years explains why many Americans still can’t get a mortgage as interest rates hit a new low.

The average rate on a 30-year fixed-rate mortgage hit 3.53% last week, the Mortgage Bankers Association said Wednesday. It was the lowest rate since at least the 1950s. But thousands of would-be homeowners are being locked out of the market because lenders, facing a hard-line stance from Fannie Mae and Freddie Mac, have grown wary of making new loans.

The two mortgage giants have been forcing banks to take back an increasing number of loans that the banks made during the boom years and sold to Fannie and Freddie. To protect themselves from such demands in the future, banks are ratcheting up credit and documentation standards for new mortgages.

“Mortgage credit is tighter than it should be,” said Treasury Secretary Timothy Geithner at a Senate hearing in July. “And the main reason for that is because banks…feel much more vulnerable now to what people call ‘put-back.’ ”

This play-it-safe stance by banks threatens to undercut the Federal Reserve’s latest effort to push down mortgage rates by buying up mortgage-backed securities. Even if rates keep falling, many people will find it much harder to take advantage.

So far, Fannie and Freddie have asked banks to repurchase $66 billion in mortgages made between 2006 and 2008, according to an analysis of federal filings by Inside Mortgage Finance, an industry newsletter. The balance of outstanding demands from both companies at the end of July was up 37% from a year earlier. Most of these loans have defaulted, so banks face losses when they take them back.

Fannie and Freddie don’t actually make loans, but instead buy those from banks and other lenders that meet certain standards. Together with federal agencies, they are backing more than nine in 10 loans being made today, up from around two-thirds of all loans before the housing bubble.

Put-backs help recover money for Fannie and Freddie, which have turned small profits in recent quarters after getting a $142 billion taxpayer bailout. Buying back defective mortgages “is part of the business if we make a legitimate mistake,” says Bill Cosgrove, chief executive of Union National Mortgage Co., a Strongsville, Ohio-based lender.

But bankers believe Fannie and Freddie are going too far. Earlier this year, Mr. Cosgrove faced a demand from Fannie Mae to repurchase a $103,000 mortgage his bank had made in 2003 after the homeowner in Garfield Heights, Ohio, defaulted in late 2010. The latest example, because the borrower made regular payments for so many years, is proof that the loan put-back process “has become more and more ridiculous,” he says. In this case, Fannie reviewed the lender’s 2003 property appraisal and decided the valuation was inaccurate. The dispute hasn’t been resolved.

A Fannie spokesman says the company has “a thorough and thoughtful process to examine loans, seek complete information from lenders and determine if a repurchase request is warranted.”

Fannie and Freddie defend put-backs as an important step to restore discipline in the underwriting process. Fannie’s chief executive, Timothy Mayopoulos, compared the loan assembly line to an auto maker’s in an August interview. Car manufactures have developed “very exacting standards” so that a repeatable process produces “the same thing day-in and day-out,” he says. The lending process still isn’t exacting, he says, which is why lenders have been forced to tighten lending standards.

There is near-universal acknowledgment that mortgages were much too easy to get during the past decade. But Mr. Cosgrove said standards are now more conservative than at any time since he started working as an underwriter in 1986.

Loan officers say their job used to be fairly straightforward: Determine that a borrower could reasonably repay the loan. Today, they say the goal is to shield themselves from a put-back. This means asking borrowers for reams of documentation—tax returns, bank statements, pay stubs, and appraisals—in order to deliver loans that can’t be questioned.

Banks are asking borrowers to explain every deposit into their bank accounts over a few hundred dollars in order to verify that their assets are their own, lest an audit later find that the buyer borrowed cash from a family member.

“Why do I care about that $100 deposit? Why am I triple checking your credit score?” says Barry Sturner, president of Townstone Financial, a Chicago lender. “Because I’m scared to death of the buyback.”

Despite strong credit scores and an ample down payment, Paul Stone and his wife had problems getting a mortgage in March from Wells Fargo & Co. to buy a $300,000 house in Broomfield, Colo. He says the lender raised concerns about his income. Mr. Stone, a real-estate agent, has worked for the same company for the past 2½ years and earns a fixed salary.

But he relocated to the Denver area from Virginia this year, and he says the bank wanted to see a two-year record of earnings in his new location. His wife eventually got a mortgage with Wells Fargo, using only her income, to buy the house.

“Wells Fargo’s goal is more than helping our customers buy a home. It is to make sure that they are able to own one successfully for years to come,” said Vickee Adams, a bank spokeswoman.

Despite the sharp drop in rates, mortgage applications for new loans have been low in recent months. In April, senior loan officers indicated in a special Federal Reserve survey that put-backs were the leading reason for tighter underwriting standards.

The average conforming loan for a home purchase that was denied by lenders in August had a borrower with a solid credit score of 734 and a 19% down payment, according to Ellie Mae, a mortgage software provider. In the past, such a borrower would have easily gotten a mortgage.

Part of the problem lies in changes in mortgage processing over the past few decades. Fannie and Freddie rolled out automated-underwriting systems in the mid-1990s that allowed lenders to punch borrower data into computer systems in order to receive faster approvals or denials.

The mortgage bust highlighted weaknesses. Fannie and Freddie did few upfront reviews of loans that they purchased; instead, they screened some of those that went bad, forcing banks to buy back any with obvious signs of negligence or fraud.

After the meltdown, the mortgage giants began hiring armies of auditors—called “bounty hunters” by bank executives—to conduct detailed reviews of loan files to spot errors that could justify a put-back.

The companies and their regulator, the Federal Housing Finance Agency, announced in September some steps to address lenders’ concerns. For loans delivered to Fannie and Freddie beginning in January, banks won’t face put-backs for certain flaws if the loan has a record of on-time payments for three years.

“Lenders have pulled back” from lending because they can’t easily predict their put-back exposure, says Maria Fernandez, an associate policy director for the FHFA. The goal of the policy changes, she says, “is to be very clear with lenders what our expectations are so we can help facilitate more liquidity.”

Federal Reserve Chairman Ben Bernanke said in September he was optimistic that the change would make mortgage markets “a little bit more open, and that is one factor, actually, that could make our [asset-buying] policy more effective.”

Industry analysts say the guidance should help ease lending standards in the long run, but it could still take time. As part of the new protocol, Fannie and Freddie will do more screening of loans immediately after they acquire them, which may boost put-backs in the near-term.

Some borrowers are having better luck getting mortgages with local banks or credit unions, which hold on to the loans they make and don’t rely on selling them to Fannie or Freddie. But community lenders aren’t large enough to fill the void left by banks’ cautious approach to making mortgages.

New mortgage regulations set to take effect next year also could hold back any thaw. One provision of the Dodd-Frank financial-overhaul law, for example, may carry hefty penalties for failing to thoroughly document a borrowers’ ability to repay a mortgage.

Banks, meanwhile, say the companies have recently stepped up scrutiny of older loans that have a longer record of making payments. Bank of America, for example, says $8 billion in outstanding put-back claims at the end of June were for loans on which borrowers had made at least 25 payments. That compares with just $3.7 billion in such loans at the end of last year. Bank of America stopped selling loans to Fannie earlier this year amid a dispute over which loans it should be forced to buy back. Both sides say they are in negotiations to resolve the matter.

Lenders can appeal put-backs by proving the loan didn’t violate underwriting guidelines. But when Fannie and Freddie deny those appeals, lenders have little recourse but to comply if they want to keep selling loans to Fannie and Freddie.

Fannie and Freddie are operating with a “gotcha mentality,” says Laurence Platt, an industry lawyer at K&L Gates in Washington. He says more loans are being put back for reasons that have nothing to do with why a borrower has defaulted. “But for their monopoly-like powers, they couldn’t get away with that.”

Mr. Mayopoulos, the Fannie CEO, dismisses such complaints. “This is about the fact that back at the time of origination, the manufacturer of that loan…did not do what they had represented that they had done,” he says. As the housing boom turned to bust, “that was pervasive,” he added.

Fannie officials also say put-backs aren’t as responsible for tighter standards as lenders suggest. Underwriting criteria for jumbo mortgages are every bit as stringent, and those loans are too large, by definition, for purchase by Fannie and Freddie.

The tougher guidelines are especially hard on borrowers who are self-employed. They tend to take more deductions on the tax returns, reducing the reported income that underwriters use to document earnings. Borrowers with uneven earnings, including those who receive a large share of their pay in commissions, bonuses, tips, or seasonal income, also are having trouble qualifying for mortgages.

Lenders are scrutinizing the house that serves as collateral for the loan by reviewing property appraisals and demanding repairs of everything from missing electrical outlet covers to broken air-conditioning units.

Missy Jerfita, a Chicago real-estate agent, had the sale of a five-bedroom home in Glenview, Ill., fall apart on the eve of the closing when the bank said it wouldn’t be willing to finance the loan due to a crack in the foundation of the house. Her client had negotiated a $10,000 discount for the buyers, who were making a large down payment and planned to repair the issue as soon as they moved in.

“They have their stuff in a moving truck, and my client is all packed up,” said Ms. Jerfita. “It was these big banks who are nervous.”

The prospective buyer sent his wife—then three months pregnant—and three kids to live with a relative in Wisconsin while he slept on a neighbor’s couch.

Ms. Jerfita, meanwhile, raced to find a local lender that agreed to fund a one-year bridge loan a few days later. Once the repairs are done, the bank will refinance the loan into a mortgage that is eligible for purchase by Fannie and Freddie.

Banks also are relying heavily on credit scores. Wendy Dalpiaz and her husband, Brett, were pre-approved for a loan until they hit a snag—her credit score fell by 100 points due to a late payment on her Amazon credit line. She didn’t realize that her 5-year-old daughter had purchased a $3 app on the family’s Kindle e-book reader until she received a notice from a credit service about her late payment. “A $3 Amazon charge: are you kidding me?” she says. “I was just floored.”

Ms. Dalpiaz, a 40-year-old nurse, had hoped to move into their home in Lake Stevens, Wash., before the school year began, but they didn’t close until Sept. 21 on the $289,000 purchase. “It just took forever,” she said.